TerraKapital Cyprus to raise EUR 15 mln for investments in Romania

TerraKapital, the Cyprus registered company targeting to achieve above-average returns of over 20% per annum by investing in property assets in the Eastern Mediterranean and South-East Europe, aims to raise up to EUR 15 mln from private investors.

The offer is for the issue of redeemable preference shares at EUR 1 per share beginning on February 14 and ending on March 14, with the fund manager having the discretion to extend the closing date to April 14.This is a private offering and current initial commitments exceed EUR 5 mln, with a minimum subscription of EUR 100.000 per investor.

Marios St. Joannides, CEO of TerraCapital Management, the investment managers of the company, told the Financial Mirror in an exclusive interview that the immediate focus is on Romania, where there are several fundamental opportunities for good returns.

Bucharest is especially seen to have exceptional growth prospects over the next seven years, a growing city doubling in population, a growing middle class, billions of euros in infrastructure investments from the EU and current property prices in the prime northern suburbs being well within fundamental economic ratios.

“The land cost per built meter of our anchor investment is EUR 60/sq.m., compared to over EUR 1000/sq.m. in the suburbs of  Nicosia. Of course the location and quick sale potential are crucial and it doesn’t mean that any piece of land has potential. One needs careful selection and the appropriate financial size, focused professional resources and the right partners and associates with expertise to make sound investments. Hence, the economies of scale, diversification, organisational structure and better terms of business to be achieved through TerraKapital,” Joannides said.

 

— Promising investment

 

As previously reported exclusively by the Financial Mirror, TerraKapital created a joint venture with A. Panayides Contracting Pcl (APC) and bought 83.000 sq. metres of prime land bordering the Green Paradise project, the most successful villa development at Corbeanca, one of the most rapidly developing suburbs of Bucharest, 16 kms north-west from the centre and 7 kms from the airport.

Half of the cost of the project amounting to EUR 9 mln has been secured through bank borrowing, with TerraKapital contributing only EUR 2.35 mln in seed capital.

The strategy is to proceed with division of the land into 120 plots and 150 apartments totalling 17,000sq.m. TerraKapital has secured exit strategies at different stages.

The projected return objective without the apartment development over 24 months is 40%-plus, while with villa /apartment development over 48 months, the IRR is seen as more than 60%. On this investment alone there is a potential profit on TerraKapital investment in excess of EUR 6 mln.

 

— Banking and property

 

Joannides has 25 years experience in the banking and financial services industry. He was General Manager of the National Bank of Greece in Cyprus and CFO of Hellenic Bank. He was also a board member of several property development companies and has extensive project and asset management experience, which were also gained during his time at SFS Group Pcl. He has managed projects including land development, office, villas and hotel developments in Cyprus, Greece and the UK.

“We are combining broad financial and banking expertise with knowledge gained from property investments with the support of a vastly experienced team at board and advisory board level to secure the best projects and be in a position to exit out at a good profit while minimizing risk,” said Joannides. In addition the seed investors and strategic partners, seasoned property investors will add value through inter-related synergies.

In the case of the Corbeanca investment in Bucharest, TerraKapital identified A. Panayides with a proven track record of successful investments in Romania and tremendous experience as property managers and developers in Cyprus and Greece, as the company’s strategic partner for Romania.

It was important from the start to attract a bank to offer financing, which confirms the valuation of the land and its potential.

“Unless I get a bank to lend against the project, I don’t consider it as safe. I know how a banker thinks and when you have a bank to offer financing, a good part of the risk is covered,” Joannides said.

Securing financing raises TerraKapital’s leverage, which will allow the company to increase its investment returns and enhance its ability to negotiate better deals with its partners and associates.

 “The same (exit strategy) also applies for people who invest in our fund, which is why the current shares are redeemable by December 31, 2015 with clearly defined possibilities as to how an investor may exit even before the last day,” Joannides said.

 

— Second project

 

TerraKapital’s second project is a promising investment of 56 building plots over 32.809 sq.m. at a prime lakeside location on the outskirts of Bucharest only 30 minutes from the airport and within proximity of the outer outskirts of the new ring road.

This investment falls within the mid-term land banking diversification asset allocation policy. The initial exit strategy for the time being is to sell the land only over a medium term period. TerraKapital has invested EUR 440.000 in this project with a return objective in excess of 30%.